The market has been experiencing a lot of gyrations at high levels lately after it made all time highs last week. It seems like directionless so far. But I think a storm is coming....soon!
Here are a few scenarios where the market may go down towards, if a correction is indeed coming....
The current buying stampede is getting very long by historical standards. As is the case with all things, the market will reverse at some point to alleviate the imbalance between buyers and sellers. Using some basic Fibonacci retracement levels, three key supports are below current price levels.
The first is the 23.6% retracement, coinciding with the 50-DMA. This is the most logical support level for a short-term correction to reduce overbought conditions. If more selling pressure comes to bear, then the 38.2% retracement, which was also the break out of the short-term consolidation heading into December, should provide support. The 50% retracement is the least likely at the current time. However, it will most likely be tested during a deeper correction back to the 200-DMA this summer.
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